Separation and divorce

With careful planning it is possible to get your money matters back on track after separation and divorce and recover any lost ground to build a bright new financial future.

When relationships end

Sometimes, even with the best effort from one or both parties, a long term relationship can end. It can be a difficult time emotionally and a network of friends and family can be a valuable pillar of support. It’s also a time to reassess your financial wellbeing.

Adjusting to a change in income

For many separating couples, starting life as a single person may mean adjusting to living off one income or making an unexpected return to the workforce.

Drawing up a personal budget is a good starting point to know how much money is coming in and what your main expenses are – bear in mind you may have to factor child support payments into your budget.

As a newly single person, you may have to trim your regular spending. It can take some getting used to, but now is the time to focus on essential spending.

Moving house

Organising affordable accommodation may be a priority, especially if you have children to care for. Costs relating to moving house could be high or outside of your budget.

Organise or update - your will, insurance and super

Until your divorce is finalised (a process that could take 12 months or more) you remain legally married and, if you die intestate (without a formal will), your spouse could still inherit everything you own. So it’s worth speaking with your solicitor to have a new will drafted if you have other beneficiaries in mind.

Take a look to see that you have adequate life insurance in place to provide for your children or other dependents and remember to complete a new binding nomination for your super. This states who you would like to inherit your super when you pass away.

Dividing up your assets

The next critical step is to seek legal advice regarding your property settlement. This will explain how the assets (and debts) you and your former spouse both own will be divided between you. By law, you and your former spouse cannot use the same solicitor for a property settlement Where possible, aim to speak with a solicitor who is a family law specialist.

At this point, it is also worth meeting with a financial adviser. The decisions you make regarding a property settlement cannot be easily overturned later on – yet they could have a tremendous impact on your future financial wellbeing. Your financial adviser can explain the pros and cons of your settlement, leaving you well-placed to make an informed decision during what can be a period of emotional and physical stress.

If you and your former spouse cannot agree on a settlement, you can apply to speak with a mediator. Only a very small proportion of separating couples end up battling it out in court and this is certainly something to avoid. A protracted legal battle can mean mounting solicitor’s bills, which will eat into your settlement. It also delays the time when you can make a fresh start and move on with your life.

Separating debt and how to manage it

Before the property settlement is finalised, you should be wary about putting your hand up for something like, the family home, as it could mean taking on the home loan – something that can be challenging on your own.

The key is to speak with lenders to explain your situation and aim to renegotiate a more manageable payment plan if it looks like you’re going to struggle with repayments – even temporarily.

Children and the financial impacts of divorce

A relationship breakdown can be especially complicated where children are involved. Often, the couple would aim to maintain areas of stability for their children’s lives – like remaining at the same school or in the same suburb.

You and your former spouse will need to work out parenting arrangements including the payment of child support. This is an area where your solicitor can provide useful guidance. There are a number of ways to determine appropriate child support payments, but if you cannot reach an amicable agreement, the government body – the Child Support Agency (CSA), will come up with a figure for you. Visit the CSA website for more information on how child support is calculated.

Single’s check list

While you come to terms with the end of your relationship, take a few important steps to rebuild your finances:

Budget for your new life and lifestyle

Take stock of where you are financially

Don’t make any major financial decisions until your property settlement is finalised and you have a regular source of income lined up

Check your life insurance (including your nominated beneficiary) and other personal cover to be sure your children are suitably protected financially

Speak with a financial adviser to develop a road map for the future.

Fundamentals for managing your finances

Spousal support is not a guaranteed income. This means being prepared to become responsible for earning an income of your own. If you have been out of the workforce for a while, it could be time to brush up your skills in preparation for getting a job.

If you find yourself responsible for paying child support, it is critical that you prioritise this payment in your personal budget. Child support is one of the few financial obligations that isn’t even cleared through bankruptcy.

Need help understanding your financial options after separation or divorce? Contact us to arrange to speak to a BT Adviser

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This information is current as at 15/08/2016.

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